Ireland's Kenny proposes coalition with second largest party

Ireland's Prime Minister Enda Kenny looks on during the commemoration of the 100 year anniversary of the Irish Easter Rising in Dublin, Ireland, March 27, 2016.Clodagh Kilcoyne

DUBLIN (Reuters) - Acting Irish Prime Minister Enda Kenny has proposed entering an unprecedented coalition government with the country's second-largest party and historic rival Fianna Fail, his Fine Gael party said on Wednesday.

Kenny made the proposal during his first meeting with Fianna Fail leader Micheal Martin since inconclusive February elections after both failed for the second time to be elected prime minister.

The two center-right parties have few policy differences but have been bitter rivals for decades and senior members of both parties, particularly in Fianna Fail, had ruled out a formal coalition with their fierce rival before the meeting.

"Taoiseach (prime minister) has formally offered Micheal Martin a full partnership govt with Independent TDs (lawmakers) - a historic change and good for Ireland," Agriculture Minister Simon Coveney, one of Fine Gael's negotiators, said on Twitter.

Fine Gael said in a statement that such a government would have the "potential to provide a stable and lasting government" and that the two party leaders had agreed to meet again on Thursday for further discussions.

A Fianna Fail spokesman said Kenny told Martin a minority government led by either party reliant on the other for support from opposition would not work. Martin will discuss the offer and other options with his party before meeting Kenny again.

The offer was a good first move on Kenny's behalf, according to Eoin O'Malley, politics lecturer at Dublin City University, as he knows Martin cannot really accept it but it allows the Fine Gael leader to appear magnanimous and constructive.

One Fianna Fail lawmaker, Lisa Chambers, told national broadcaster RTE that she would not be prepared to go back on the party's election promise not to enter a coalition with Fine Gael.

The rivalry between the parties dates back almost a century to Ireland's civil war and senior members admit they deeply mistrust each other.

Since the election the parties had separately been vying to win the support of 15 independent members of parliament to form a minority government before asking the other to back it from the opposition benches on a vote-by-vote basis.

Martin, who would have to win approval of reluctant grassroots members of the party to enter coalition with its rival, has not ruled out backing a minority Fine Gael government.

However, analysts have said a minority administration would be weak and short-lived, potentially paralyzing policy needed to tackle bottlenecks in housing and infrastructure that threaten to choke a sharp economic recovery.

Ireland's central bank has said the impasse has so far had little effect on Europe's fastest growing economy but warned it could have an adverse impact. Data on Wednesday showed consumer sentiment posted its sharpest fall in 17 months in March.

If the parties cannot come to some sort of arrangement, as they did in the 1980s when Fine Gael indirectly backed a Fianna Fail minority government, Ireland faces a second election.